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One year ago: Could Dick Fuld have saved the world?

August 27, 2009 | 6:00
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Probably the single biggest "what if" of the financial-system meltdown last fall will forever be asked about the failure of Lehman Bros.: What if the investment bank hadn’t collapsed into bankruptcy in mid-September?

If was a year ago this week that Lehman was said to have been in talks with South Korean investors who were interested in taking a large stake in the firm.

South Korea’s Maeil Business newspaper today said that Korea Development Bank still was interested in a Lehman stake, but at a much lower price than what had been discussed, according to Bloomberg.

Talks on a possible investment ended after Lehman insisted that the Korean bank buy shares at a price 50% higher than the firm’s book value, the Korean newspaper said, citing an unnamed source. Lehman’s book value, or net value of its assets, was about $35 a share at the end of May, but any further write-downs of troubled assets would of course drag that number lower.

Lehman’s shares had plunged to $13 by mid-August of last year amid growing doubts about its future.

What if Lehman CEO Richard Fuld had swallowed his pride and agreed to sell a big chunk of his troubled firm to the Korean investors?

We’ll never know, if Lehman hadn’t met its demise, whether credit markets worldwide could have avoided the deep freeze that set in shortly thereafter, as banks simply stopped lending to one another.

Or maybe if Lehman hadn’t been the trigger the failure of another financial giant would have assured the same cataclysmic credit-market outcome. Maybe the house of cards had to fall.

The government rescued American International Group just a few days after regulators allowed Lehman to die. If Lehman had lived perhaps AIG would have been the sacrificial lamb as the U.S. sought to prove, if just that once, that no financial company was too big to fail.

Still, if we could go back one year -- could Dick Fuld have saved the world?